Exam 10: Depreciation, cost Recovery, amortization, and Depletion

Discuss the options available regarding treatment of an amount paid in excess of the FMV of an acquired company's net assets in a business combination.

A calendar-year taxpayer places in service one new piece of equipment this year on March 1.The asset cost $600,000.For this first year,the taxpayer will base the depreciation deduction on 10 months.

Enrico is a self-employed electrician.In May of the current year,Enrico acquired a used van (5-year property)for $12,000.He used the van 30% for business.The maximum depreciation deduction for is

Everest Corp.acquires a machine (seven-year property)on January 10,2016 at a cost of $2,022,000.Everest makes the election to expense the maximum amount under Sec.179. a.Assume that the taxable income from trade or business is $1,500,000. b.Assume instead that the taxable income from trade or business is $400,000.

During the year 2016,a calendar year taxpayer,Marvelous Munchies,a chain of specialty food shops,purchased equipment as follows: Assume the property is all 5-year property,but does not qualify for bonus depreciation.What is the maximum depreciation that may be deducted for the assets this year,2016,assuming the alternative depreciation system is not chosen?

Stellar Corporation purchased all of the assets of Bellavia Company as of January 1 this year for $1 million.Included in the assets acquired are the following intangible assets: What is Stellar's maximum amortization deduction for the year?

Jack purchases land which he plans on developing as a golf course.The land costs $20,000,000 and the cost of clearing the land,earthmoving,constructing hazards,bunkers and greens,and installing irrigation systems will cost an additional $6,000,000.What tax issues should Jack consider?

Under the MACRS system,depreciation rates for real property must always use the mid-month convention in the year of acquisition.

Mehmet,a calendar-year taxpayer,acquires 5-year tangible personal property in 2016 and does not use Sec.179.The property does not qualify for bonus depreciation.Mehmet places the property in service on the following schedule: What is the total depreciation for 2016?

In January of 2016,Brett purchased a Porsche for $100,000 to be used in his business.Brett drove the car 83 percent of the time for business.What is the maximum amount that Brett may deduct in 2016?

On May 1,2008,Empire Properties Corp. ,a calendar year taxpayer,purchased an apartment building for $1,000,000,of which $400,000 was allocable to the land.The corporation sold the property this year on September 23,2016. a.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2008? b.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2015?

In May 2016,Cassie acquired a machine for $30,000 to use in her business.The machine is classified as 5-year property.Cassie does not expense the property under Sec.179,and the machine is not eligible for bonus depreciation.Cassie's depreciation on the machine this year is

Trenton Corporation places in service $10 million of equipment on June 1,2016.The equipment is five-year property,and it is not "used" property.What is the maximum cost recovery deduction Trenton Corporation is allowed this year with respect to this property?

Under the MACRS system,the same convention that applies in the year of acquisition (e.g. ,half-year,mid-quarter,or mid-month)also applies in the year of disposition.

Expenditures that enlarge a building,any elevator or escalator,any structural component that benefits a common area or the internal structural framework are not considered qualified leasehold improvement property.

Paul bought a computer for $15,000 for business use on March 18,2014.This was his only purchase for that year.Paul used the most accelerated depreciation method available,but did not elect Sec.179.Bonus depreciation was not available.Paul sells the machine in 2016.The depreciation on the computer for 2015 is

A purchaser of the assets of a business must allocate the purchase price to the individual assets in accordance with the written agreement between the purchaser and the seller.Which of the following assets would be least preferred for purposes of allocating value from the purchaser point of view?

If at least 50% of the aggregate basis of all new personal property for the tax year is placed in service during the last three months of the year,the mid-quarter convention is required.

Unless an election is made to expense or defer and amortize research and experimental expenditures,these costs must be capitalized.

When a taxpayer leases an automobile for 100% business purposes,the entire lease payment is deductible.